- GBP/USD is expected to rise as the US dollar weakens, especially with anticipated Fed rate cuts in 2025.
- The CME FedWatch tool indicates there’s a 97% likelihood of a Fed rate cut in October.
- The British pound is likely to strengthen as the UK economy improves in the second quarter.
GBP/USD is continuing its upward trend, now in its fourth consecutive session, trading around 1.3460 during Wednesday’s Asian hours. This surge comes as the US dollar (USD) struggles following weak employment data, heightening expectations for a Federal Reserve rate cut. The CME FedWatch tool points to a nearly 97% chance of a rate cut in October, with a 76% probability of an additional cut in December.
Recent job report figures from the US show a slowdown in the labor market, even though job vacancies nudged up slightly from 7.21 million to 7.23 million in August. Interestingly, the employment rate dipped to 3.2%, the lowest since June 2024; however, layoffs remained relatively low. Traders are likely watching for updates on the US ADP employment report and the ISM manufacturing PMI data for September, which could be influenced by potential government shutdowns.
Currently, the US government is closed, leaving about 750,000 federal employees in a bind due to Congress’s failure to pass a funding bill. The U.S. Labor Bureau announced Monday that its statistical agency would halt the release of crucial data, including the monthly employment reports, during a partial shutdown.
The GBP/USD pair has made gains as the Pound Sterling (GBP) found support following the release of stronger UK Gross Domestic Product (GDP) data for the second quarter. The figures were revised upward to a 1.4% year-on-year growth, exceeding the preliminary estimate of 1.2%. The GDP growth for the quarter aligned with an initial estimate of 0.3%.
That said, the British pound might still face challenges as Lieutenant Governor Dave Ramsden of the Bank of England (BOE) supports rate cuts amid rising concerns regarding the UK labor market. Ramsden also expressed optimism about easing inflation pressures, noting that current interest rates remain somewhat constrained.
